I’d prefer the second. It means kids with shitty parents are at a serious disadvantage but that’s the case under the current system. The benefit is it’s a lot harder to kill local culture through indoctrination that is possible with centralized schooling. Even if members of the community are calling a lot of the shots. In my community it’s at the point where people not from here drastically outnumber those of us that are from here.
Then it's no longer your community. It's theirs.
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Which is another reason to favor doing things at the familial level. It makes having several communities in the area more feasible.
Yes, homeschooling, private schooling, breaking schools up into smaller catchments, etc. All attempts to get around heterogeneity.